During the autumn Budget announcement yesterday, chancellor Philip Hammond revealed that only short-haul Air Passenger Duty (APD) rates would be frozen in 2020/21, with all long-haul taxes set to increase in line with inflation.
Although the freeze on short-haul rates would benefit 80 per cent of passengers, according to the chancellor, the decision will be a hit for businesses sending employees overseas to strike new deals after Brexit.
The UK already has the highest rate of APD in Europe and one of the steepest in the world.
Last week, travel industry body ABTA encouraged businesses, airlines and individuals to write to their local MPs to ask for a 50 per cent reduction in the tax, claiming such a move would send “a strong message that Britain is open for business” after Brexit.
Hammond’s announcement, if the Budget is approved, will mean the long-haul economy rate will increase by £2 to £80, while the rates for those travelling in premium economy, business and first class will rise by £4 to £176. Private jets will be hit by an increase of £13 to £528.
Responding to the news, ABTA CEO Mark Tanzer commented: “While we recognise that the chancellor’s freeze on short-haul air passenger duty will come as some relief to the industry, another inflationary increase for long-haul will further reduce the UK’s international competitiveness, particularly at a time when Brexit means the UK should be seeking to establish new links with destinations across the world. We urge the chancellor to commission detailed economic modelling, and to consider cutting APD, at the earliest opportunity to boost the UK economy.”
The announcement has been met with criticism from the Board of Airline Representatives in the UK (BAR UK), which said: “The chancellor’s decision to increase long-haul APD, at this crucial time as the UK prepares to leave the EU, is beyond the comprehension of airlines as they seek clarity and confidence in the UK economy. Today’s Budget was the perfect opportunity for the chancellor to boost economic growth through stimulating long-haul connectivity to vital existing and new long-haul markets. The freeze in the short-haul rate is a token gesture that cannot offset the damaging impact of increasing what is by far the highest air passenger tax in Europe.”
While travel trade association UKinbound welcomed other aspects of the Budget announcement, chairman Mark McVay said it is “disappointing that there will be no change to APD and VAT regimes at this point, even though there is strong evidence that cutting these taxes will in fact generate more revenue for the government in the long term.”
However, Rajeev Shaunak, head of travel and tourism at UK accounting firm MHA MacIntyre Hudson, added: “The chancellor didn’t grant the travel industry its number one wish – there was no reduction in APD despite the continuing calls from the industry. This wasn’t really a surprise given APD generates approximately £3 billion for the UK treasury and any reduction would impact other politically sensitive areas such as health, education and social services.”